Insurer May Repudiate a Fire Claim Built on False Declarations; Surveyor Reports Cannot Be Brushed Aside — Supreme Court

The insured, a paper-board manufacturer, claimed about ₹7.31 crore for waste-paper stock and a tin shed damaged in a fire. Its figure for the loss kept changing: about ₹15 crore to the media, ₹10 crore to the insurer, ₹8.45 crore in the claim form and ₹7.31 crore in the revised claim.

The preliminary surveyor, an investigating agency and the final surveyor all reported doubts about the fire and the stock: no electric connection in the yard, smoking prohibited, a delay of about 50 minutes in informing a fire station 6–7 km away, water sprinkled on the roof or ground instead of on the fire, tin sheets largely unaffected, a shed reportedly broken down by a JCB before the fire, old burnt Hessian bags not recorded as raw material, and book stock not matching physical stock. The final surveyor assessed the loss at about ₹46 lakh but reported that the books had been manipulated to inflate the claim. The NCDRC nevertheless held that the insured did not have to prove the cause of the fire and awarded ₹2.40 crore.

The Supreme Court held that the facts weighed heavily against the insured. Statements of the insured’s own supervisor, workers and accountants showed that only unusable, old waste had been kept in the tin shed, contrary to the management’s declaration that usable raw material was stored there. The surveyor also found an abnormal rise in yield and consumption figures without a stock register. These were false declarations made to support the claim.

Leaving aside the strong possibility that the fire was not accidental, or at least was not genuinely fought, the repudiation for breach of Policy Conditions 6 and 8 was sustainable. The NCDRC was not justified in brushing aside the surveyors’ reports or in holding, without basis, that there was no delay in informing the fire station. Its order was set aside.

The judgment applies Pradeep Kumar (2009), Khatema Fibres (2023), Sri Venkateswara Syndicate (2009) and Roshan Lal Oil Mills (2000) on surveyor reports, and reads Canara Bank v. United India Insurance, (2020) 3 SCC 455, New India Assurance v. Mudit Roadways, (2024) 3 SCC 193 and Orion Conmerx v. National Insurance, (2026) 5 SCC 445 as protecting insureds only where there is no allegation or finding that the insured instigated the fire. It does not depart from those cases; it applies their exception.

For insured businesses: a fire claim must be supported by accurate stock records, contemporaneous purchase bills and consistent statements. Changing figures, stock that exists only in the books, and statements contradicted by one’s own staff can defeat the entire claim, not merely reduce it.

For consumer litigation against insurers: if the survey report is adverse, the complaint should specifically plead and prove the deficiency in the survey (breach of the surveyor’s code of conduct, ignored material, arbitrary assessment). A general denial will not persuade the Commission or the Supreme Court. This note is shared for general legal awareness and is not legal advice.